Cenvat credit can be used for service tax by a manufacturing unit also acting as a service provider.

Cenvat credit earned on manufacturing activity may be used to discharge service tax on output services where a manufacturer is also treated as a service provider. The Tribunal noted that the Cenvat Credit Rules, 2004 permit utilisation of credit for payment of service tax on output service, and that the service tax framework treats the person liable to pay service tax as a provider of taxable service for limited purposes. It also found no applicable departmental prohibition against such utilisation by a manufacturing unit acting as a service provider. The asserted restriction was rejected, and the assessee's use of credit was upheld.

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Issues: Whether a manufacturer who is also treated as a service provider can utilise Cenvat credit earned on manufacturing activity for payment of service tax liability on output service.

Analysis: The Tribunal noted that the Cenvat Credit Rules, 2004 permit utilisation of credit for payment of service tax on output service, and that the service tax framework treats a person liable to pay service tax as a provider of taxable service for limited purposes. It further considered the departmental instructions indicating that, apart from specific restrictions not relevant here, there was no prohibition against using Cenvat credit for payment of service tax by a manufacturing unit acting as a service provider. On that basis, the asserted bar on utilisation was rejected.

Conclusion: The assessee was entitled to use the manufacturing Cenvat credit towards service tax liability, and the Revenue's challenge failed.

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